Evaluation of waste oil management policies: the extended producer responsibility

B azilian Jou nals o Business ISSN: 2596-1934 921 B az. J. o Bus., Cu i iba, . 3, n. 1, p. 921-937 jan. /ma . 2021 E aluación de las polí icas de ges ión de acei es usados: la esponsabilidad ampliada del p oduc o E alua ion o was e oil managemen policies: he ex ended p oduce esponsibili y DOI: 10.34140/bjb 3n1-052 Recebimen o dos o iginais: 20/11//2020 Acei ação pa a publicação: 20/12/2020 Asunción A ne Güe e PhD in Economics (Uni e si y o Za agoza) Depa men o Applied Economics C/ G an Vía 2, 50005 Za agoza (Spain) Co eo elec ónico: aa ne @uniza .es RESUMEN El Real Dec e o 679, de 2 de junio de 2006, de ges ión de los acei es indus iales usados, es ablece la esponsabilidad ampliada del p oduc o (RAP). Pa a su aplicación se cons i uye el Sis ema In eg ado de Ges ión de Acei es Usados en España (SIGAUS), sus i uyéndose la inanciación de la ges ión de los acei es usados median e sub enciones po los impo es ecaudados de la apo ación del p oduc o de acei es lub ican es. A su ez, el eal dec e o es ablece los obje i os medioambien ales de ecogida del 95% de acei es usados gene ados, alo ización del 100% de acei es usados ecogidos y egene ación del 55%, en 2007, y el 65%, desde 2008. La ex ensión de la RAP en 2015 a o os esiduos, que con ienen acei es usados, modi ica la esponsabilidad inancie a de SIGAUS. Asimismo, en 2016, es necesa io dispone de mecanismos de inanciación adicionales, indexados a la co ización in e nacional de los lub ican es. Es e abajo iene po obje o analiza la e iciencia de la RAP en la ges ión de los acei es usados. La me odología consis e en la es imación de las elas icidades de o e a y demanda, así como el desa ollo de un modelo de equilib io pa cial, del me cado de acei es usados. De acue do con los esul ados, la RAP cons i uye un es ánda de ma e ial eciclado, basado en un sis ema de pe misos negociables, y es más e icien e que una sub ención. El p ecio del pe miso jus i ica la apo ación del p oduc o a SIGAUS de 60 € po onelada. Finalmen e, los esul ados sugie en que la RAP ga an iza la inanciación de la ges ión del acei e usado has a 2015. Palab as cla e: Acei es usados, Regulación medioambien al, E iciencia, Responsabilidad ampliada del p oduc o , Sub enciones. ABSTRACT Royal Dec ee 679/2006 o June 2 on he managemen o used indus ial oils manda es he p oduce ex ended esponsibili y (EPR). Fo i s implemen a ion, he In eg a ed Was e Oil Managemen Sys em (SIGAUS) is es ablished, eplacing he inancing o he managemen o was e oils h ough subsidies o he amoun s collec ed om he con ibu ion o he p oduce o lub ica ing oils. In u n, he oyal dec ee se s en i onmen al a ge s o collec ing 95% o was e oils gene a ed, he eco e y o 100% o was e oils collec ed, and egene a ion o 55%, in 2007, and 65%, since 2008. The ex ension o EPR in 2015 o o he was e, con aining was e oils, modi ies SIGAUS' inancial esponsibili y. Addi ional inancing mechanisms, indexed o he in e na ional quo e o lub ican s, a e also needed in 2016. This wo k aims o analyze he e iciency o EPR in he managemen o B azilian Jou nals o Business ISSN: 2596-1934 922 B az. J. o Bus., Cu i iba, . 3, n. 1, p. 921-937 jan. /ma . 2021 was e oils. The me hodology consis s o es ima ing supply and demand elas ici ies and de eloping a pa ial equilib ium model o he was e oils ma ke . Acco ding o he esul s, EPR is a ecycled ma e ial s anda d (RMS), based on a nego iable pe mi sys em (NPS), and is mo e e icien han a subsidy. The p ice o he pe mi jus i ies he p oduce 's con ibu ion o SIGAUS o 60€ pe on. Finally, he esul s sugges ha he EPR gua an ees he inancing o was e oil managemen un il 2015. Keywo ds: Used oils, En i onmen al policy, E iciency, Ex ended p oduce esponsibili y, Subsidies. 1 INTRODUCTION Royal Dec ee 679/2006 o June 2 on used indus ial oils es ablishes EPR o he managemen o indus ial oils used in Spain. Was e oils a e haza dous was e and include all mine al o syn he ic oils, indus ial o lub ica ion, which a e no longe sui able o he in ended ini ially use 1 . Was e oils a ec ed by Royal Dec ee 679/2006 a e used mine al oils om combus ion engines and ansmission sys ems, lub ican s, u bines, and hyd aulic sys ems, and mix u es and emulsions con aining hem and excluding ma ine and a ia ion, p ocess, and g ease oils. The EPR, in he managemen o was e oils, means ha manu ac u e s o lub ica ing oils mus ensu e he co ec managemen o he was e oils deli e ed o hem, companies, o wo kshops, o comply wi h he obliga ion o deli e y o was e oils o au ho ized manage s, as well as o co e he o al cos o he managemen ope a ions 2 . Royal Dec ee se s he ecological a ge s o collec ing 95% o was e oils p oduced and he eco e y o 100% o he was e oils collec ed in 2006. Besides, he egene a ion o 55% in 2007 and 65% in 2008 o he oils eco e ed 3 . Addi ionally, Royal Dec ee 679/2006 imposed on manu ac u e s he obliga ion o de elop a BPP o es ablish measu es o p e en he en i onmen al impac o indus ial oil was e, o educe i s gene a ion and o acili a e i s alo iza ion, p e e ably h ough egene a ion o o he o ms o ecycling, and o inco po a e egene a ed base oils in o i s composi ion 4 . Manu ac u e s o indus ial oils can ensu e he collec ion and managemen o oils i , oge he wi h o he economic ope a o s, hey o ganize in eg a ed managemen sys ems (IMS) 1 B.O.E. o June 3, 2006, No. 132. 2 Law 22/2011 o July 28 on con amina ed was e and soils ansposes Di ec i e 2008/98/EC, he Was e F amewo k Di ec i e, es ablishes a common legal amewo k o he implemen a ion o he EPR (B.O.E. o 29, July 2011, No. 181). 3 Regene a ion consis s o emo ing con aminan s, oxida ion p oduc s, and addi i es con aining was e oils o ob aining base lub ica ing oil (Angulo e al.,1996; Gómez-Miñana, 1993; LLobe Díaz, 1995 and Ramsden, 1995). The base lub ica ing oils, i s e ined o egene a ed, a e mixed wi h addi i es o achie e he quali y and pe o mance le els equi ed o manu ac u e lub ican s acco ding o hei des ina ion (au omo i e and indus ial uses). In Spain, he pe o mance o ins alled echnologies, o ob aining egene a ed oil om used oil, anges om 60 o 75%. Combus ion, o was e oils as uel, cons i u es ano he o m o eco e y o he used oil, ollowing a decon amina ion p ocess. 4 Cu en ly, BPP o he pe iod 2018-2021 is in o ce (SIGAUS, 2020). B azilian Jou nals o Business ISSN: 2596-1934 923 B az. J. o Bus., Cu i iba, . 3, n. 1, p. 921-937 jan. /ma . 2021 au ho ized and con olled by he Au onomous Communi ies 5 . In 2006, he leading manu ac u e s o lub ican s in Spain cons i u ed he In eg a ed Was e Oil Managemen Sys em (SIGAUS), by which inancing he managemen o was e oils is ca ied ou by he lub ican oil manu ac u ing sec o . The unding o managing was e oils h ough public subsidies is eplaced by he amoun s collec ed om he p oduce 's con ibu ion o SIGAUS o 0.06 € pe kilog am o indus ial oil placed on he ma ke . Cu en ly, EPR applies o o he was e. Royal Dec ee 110/2015 o Feb ua y 20 on was e elec ical and elec onic equipmen (WEEE) has mean ha he esponsibili y o he oils con ained in he esidues o hose p oduc s is ans e ed om he lub ican manu ac u e o he manu ac u e o hose p oduc s. Consequen ly, i supposed a u he alloca ion o esponsibili ies o was e oils subjec o Royal Dec ee 679/2006. Acco ding o he 2015 ma ke s udy, wi h he en y in o o ce o Royal Dec ee 110/2015, SIGAUS' ma ke sha e inc eases om 87.13% o 87.15%, and he aud bag i olun a ily assumes, as majo i y IMS, namely ee ide s, dec eased om 2.89% o 1.41%, o was e oil a ec ed by Royal Dec ee 679/2006 6 . Consequen ly, new egula ions on was e oils in WEEE modi ied he inancing esponsibili y o was e oils o he i s en yea s. Besides, in 2016 he con ex o low oil p ices has highligh ed he need o an addi ional inancing mechanism o co e he in insic sho all in was e oil collec ion and managemen ac i i ies, acco ding o he Independen Commodi y In o ma ion Se ices Index (ICIS) 7 . In 2017, by Royal Dec ee 20/2017, o Janua y 20, on end-o -li e ehicles (ELV) whe ein esponsibili y o oils con ained in such ehicles is ans e ed o he manu ac u e o such ehicles 8 . Economic incen i e policies' e iciency in p omo ing he collec ion and co ec managemen o was e oils in Spain has p e iously been s udied in A ne e al. (2005, 2006b). The main inding was ha an RMS, applied h ough a SPN, is mo e e icien han a subsidy because he ma ginal p i a e cos (MPC) o an RMS is lowe han he MPC o a subsidy. Besides, he IMS o was e oil is an RMS (A ne , 2010). A e en yea s o EPR in he managemen o was e oils, he objec i e o his wo k is o analyze he e iciency o his policy o de e mine he p ice o he pe mi and he con ibu ion o he lub ican p oduce o SIGAUS, and i s MPC, o upda e he da a se ies. 5 In eg a ed was e oil managemen sys ems a e he se o ela ionships, p ocedu es, mechanisms, and ac ions which, subjec o au ho iza ion and supe ision by he au onomous communi ies in whose e i o ial a ea hey a e implemen ed, a e pe o med by he economic ope a o s conce ned h ough olun a y ag eemen s app o ed o au ho ized by o h ough collabo a ion ag eemen s wi h he compe en public adminis a ions. 6 Independen ma ke s udy conduc ed by he consul an independen PwC (SIGAUS, 2016,a). 7 SIGAUS (2016b). 8 In 2018, he ma ke a ec ed by di e en EPR egula ions accoun s o 83% o he o al lub ican ma ke o 462,573 ons. The emaining 17% co espond o g eases, p ocess oil, o ma ine oils subjec o he Ma pol Con en ion. The ma ke sha e subjec o EPR, excluding oil expo ed (in elec ical and elec onic equipmen , componen s, and ehicles), co esponds o SIGAUS a 86.48% (including uniden i ied oils, 2.19%, and a ma gin o e o o 0.1%); WEEE a 0.60%; ELV a 5.38%; IMS independen p oduce s (SIGPI) a 6.56%, and Au omo i e impo s a 0.99% (SIGAUS, 2020). B azilian Jou nals o Business ISSN: 2596-1934 924 B az. J. o Bus., Cu i iba, . 3, n. 1, p. 921-937 jan. /ma . 2021 The me hodology o assessing he e iciency o he EPR consis s o de eloping a pa ial equilib ium model o he was e oils ma ke and calcula ing he incidence and MPC o his policy. The empi ical applica ion o IMS o was e oils in Spain consis s o es ima ing a coin eg a ion equa ion be ween he a iable amoun o was e oils in ended o egene a ion, WOR, and he i s e ining base lub ica ing oils p ice, in nominal e ms FRP, using Dynamic O dina y Minimum Squa es (DOLS). Acco ding o he esul s, he EPR is mo e e icien han a subsidy being, espec i ely, he MPC o hese policies -1.25 and -1.55. In u n, he p ice o he pe mi , equal o 0.86 eu os pe on, allows ob aining he alue o he lub ican manu ac u e 's con ibu ion o SIGAUS, o 60 eu os pe kilog am. The wo k has he ollowing sec ions. Subsequen ly, he economic li e a u e e iew on he e iciency o economic incen i e policies in was e managemen . The nex sec ion p esen s he analysis o he e iciency o EPR in was e oil IMS. Sec ion ou and i e a e e e ing o he empi ical applica ion o he Spanish was e oil ma ke and esul s. The las sec ion summa izes he main conclusions. 2 REVIEW OF ECONOMIC LITERATURE F om an economic pe spec i e, was e gene a ion is concep ualized as a nega i e ex e nali y de i ed om p oduc ion and consump ion ac i i ies. The paymen sys ems o was e gene a ed allow in e nalizing hese cos s and gene a ing he op imal amoun o was e. Howe e , his policy c ea es a clea incen i e o illegal dumping and incine a ion (Jenkins, 1993). Al e na i ely, o educe he amoun o was e o be disposed o , economic analysis conside s policies ha p omo e ecycling. The main incen i es a e deposi - e und sys ems (DRS), axes on na u al aw ma e ials, ecycling subsidies, and RMS. The DRS is de ined as he combina ion o a p oduc ax and a ecycling subsidy. Va ious au ho s (Dinan, 1993; Fulle on and Kinnaman, 1995; Sigman, 1995; Palme and Walls, 1997 and 1999) poin ou ha he SDR is an e icien policy o educe he amoun o was e o be disposed o because hey combine he wo e ec s ha cha ac e ize a Pigou ian ax: educing he p oduc and eplacing na u al inpu s wi h ecycled ones 9 . I applied indi idually, p oduc axes in luence only he educ ion in o igin and ecycling subsidies, and consequen ly, hey miss he possibili y o educing he amoun o was e o be disposed o by combining he wo policies (Palme and O he s, 1997). Howe e , he high cos s o implemen ing he DRS ha m he ela i e e iciency o his policy. 9 Fulle on and Wol e on (2000) gene alize he SDR and assimila e i o a p oduc ax and a subsidy o clean ac i i y (emission con ol, ecycling, o disposal in a con olled land ill). B azilian Jou nals o Business ISSN: 2596-1934 925 B az. J. o Bus., Cu i iba, . 3, n. 1, p. 921-937 jan. /ma . 2021 I a DRS is applied o p oduce s a he han consume s, he cos dec eases because he numbe o agen s and p oduc s conce ned is lowe 10 . In u n, he DRS is consis en wi h he p inciple o p oduce esponsibili y and EPR 11 . The ax holds p oduce s accoun able o disposal cos s and encou ages he educ ion o was e and he weigh o p oduc s - i es ablished on in e media e p oduc s - and he ecycling subsidy p omo es he use o ecycled ma e ials (Palme and Walls, 1999). Reducing he weigh o p oduc s is pa o a company's s a egy o he design and cha ac e is ics o i s p oduc , pa icula ly, i s ecyclabili y 12 . Calco and Walls (2005) poin ou ha , in he absence o e icien ma ke ope a ion, an DRS, join wi h a inal elimina ion ax, encou ages a design ha p omo es a su icien le el o ecycling 13 . Taxes on na u al aw ma e ials educe he amoun o inal p oduc and he use o na u al esou ces and ecycling i he ma ginal p oduc i i y o na u al and ecycled inpu s di e s and, he e o e, he op imal solu ion in ol es subsidizing he inal p oduc (Palme and Walls, 1994). Only i he ma ginal p oduc i i y o na u al and ecycled inpu s is cons an and equal o uni y is his policy e icien (Miedema, 1983; Sigman, 1995). Recycling subsidies encou age ecycling, bu also consump ion and he amoun o was e gene a ed (Miedema, 1983; Palme and Walls, 1994; Sigman, 1995; Palme and o he s, 1997). In his case, he op imal solu ion equi es a p oduc ax o be applied. The RMS in p oduc ion, o obliga ion o con ain a pe cen age o ecycled inpu s in hei composi ion, encou ages ecycled ma e ials. Howe e , i he ma ginal p oduc i i y o hese ma e ials is ela i ely high, hey inc ease he amoun o p oduc and was e and he p oduc mus be axed; o he wise, he p oduc mus be subsidized (Palme and Walls, 1997). RMS can be es ablished indi idually o each company o indus y, h ough an NPS, which p o ides g ea e lexibili y and educes i s cos (Dinan, 1992; Palme e al., 1995). This sys em in ol es he exchange o pe mi s be ween hose companies ha use o e - ecycled inpu s ela i e o he s anda d and hose ha do no comply. The la e mus acqui e pe mi s o comply wi h he obliga ion imposed by he s anda d. The cos o RMS depends on he cha ac e is ics wi h which he pe missions sys em is de ined. I he numbe o pe missions is se ela i e o he s anda d, RMS will be e icien . O he wise, he esul 10 The cu en in eg a ed managemen sys ems o which he p oduce is esponsible o he was e gene a ed by i s p oduc s - such as packaging managemen sys ems - cha ge a ee o collec ing and sepa a ing was e. This a e is a p oduc ax and he e o e does no encou age ecycling (Palme and Walls, 1999). 11 The p inciple o p oduce esponsibili y implies some o m o inancial esponsibili y o he manu ac u e managing he was e ha will gene a e his p oduc . 12 The design o he p oduc s cu en ly acqui es g ea ele ance in was e managemen . The acili y o managing a p oduc o be ecycled is al e na i ely de ined as a p oduc ’s cha ac e is ic (Fulle on and Wu, 1998). Besides, i is de ined as he company’s cos (Calco and Walls, 2000) o he con en o speci ic ma e ial in he p oduc (Eichne and Pe hig, 2001). 13 The ax, lowe han he Pigou ax ha would co ec ex e nali y in he spill, would incen i ize he educ ion o was e by amilies wi hou gene a ing se ious illegal disposal p oblems. The op imal design ha maximizes ecycling could only ob ained h ough he e icien unc ioning o he ma ke . B azilian Jou nals o Business ISSN: 2596-1934 926 B az. J. o Bus., Cu i iba, . 3, n. 1, p. 921-937 jan. /ma . 2021 will be unde ined, and he cos will be g ea e han he cos o a p oduc ax (Sigman, 1995). In gene al, e en es ablishing he nego iable pe mi sys em, RMS in luences ecycling, bu no p e en ion in was e gene a ion, and he p oduc should be axed (Walls and Palme , 2001; Walls, 2003). 3 EFFICIENCY OF THE EPR IN WASTE OILS IMS Since 2007, SIGAUS has me he collec ion and egene a ion objec i es se by he Royal Dec ee 679/2006 (Table1). Also, he pe cen age o was e oil gene a ion o lub ican consump ion has been highe han he ini ial es ima e o he Minis y o he En i onmen , o 40%. In IMS, he a io o used oil p oduced, and lub ican consump ion is changed in each iscal yea , wi h a a ia ion in 2006-2015, be ween 41.68% and 49.5%. As a esul , he sha e o was e oil gene a ion in IMS is 45%, o he en i e pe iod, while he sha e o was e oils in ended o egene a ion is 69%. In u n, he a e age consump ion o lub ican s and he amoun o was e oils gene a ed o ha pe iod a e equal, espec i ely, o 280,000 ons and 126,000 ons. Table 1. Consump ion o lub ica ing oils (LC), was e oils collec ed and in ended o bu ning (WOB), egene a ion (WOR), and consump ion o egene a ed base oil (RBO) Yea LC (1) Was e oil gene a ed % Was e oil collec ed Collec ion a e WOB % WOR % RBO (2) (2)/(1) % 2005 515.600 40,00 206.240 100,00 33,72 65,53 84,050 16,30 2006 507.000 40,00 202.800 100,00 34,61 64,66 86,241 17,00 2007 415.421 41,68 173.151 100,00 26,40 73,60 82,434 20,00 2008 373.461 48,22 180.070 100,00 30,40 69,60 80,065 21,00 2009 312.662 49,50 154.775 100,00 33,20 66,80 65,193 20,00 2010 321.304 44,27 142.237 100,00 33,70 66,30 60,741 19,00 2011 302.265 44,48 134.452 100,00 30,97 69,02 60,695 20,08 2012 276.025 46,98 129.663 100,00 34,50 65,50 54,090 20,00 2013 268.589 47,21 126.796 100,00 35,00 65,02 53,388 19,80 2014 278.341 45,3 126.089 100,00 30,08 69,92 56,900 20,44 2015 291.670 41,39 120.715 100,00 21,23 78,77 61,537 21,00 No e: since 2006, lub ica ing oil a ec ed by Royal Dec ee 679/2006 o June 2 and he used oil collec ed by SIGAUS Own sou ce This sec ion p esen s a pa ial equilib ium model o he was e oils ma ke o assess he e iciency o di e en economic incen i e policies p oposed in he managemen o was e oils 14 . In he ma ke o lub ica ing oils, he p oduc ion and consump ion o he e ined and egene a ed base oils (BO) is added wi h he pe cen age, ɣ, o addi i es inco po a ed o he manu ac u e o lub ican s, o de e mine he p oduc ion o lub ica ing oils (LO). The sha e o addi i es in lub ican s’ composi ion has e ol ed wi h he di e en ia ion o lub ican s and hei p ac ical applica ion 14 A mo e de ailed analy ical de elopmen o he pa ial equilib ium model o he was e oil ma ke was in A ne e al. (2005, 2006b). B azilian Jou nals o Business ISSN: 2596-1934 927 B az. J. o Bus., Cu i iba, . 3, n. 1, p. 921-937 jan. /ma . 2021 cu en ly a ound 20%. I EPR is applied in he managemen o was e oils, he pe cen age o was e oil gene a ion om he consump ion o lub ica ing oils, α, is modi ied each yea acco ding o he was e oils collec ed by he IMS (Figu e 1). In 2006-2015, he α coe icien is be ween 41.4% and 49.5% (Table 1). In u n, was e oils a e in ended o egene a ion in a a iable pe cen age, μ, which in IMS is a leas 65%. Figu e 1. P oduced Used Oil (WOP) and Regene a ed Base Oil (RBO) in IMS Sou ce: own sou ce Consequen ly, as base oils a e he undamen al componen o lub ica ing oils, he equilib ium p ice o base oils de e mines he equilib ium p ice in he lub ican oil ma ke . I P is he p ice o base oils, he supply unc ion o was e oils in ended o egene a ion is, =()au S P (1) In u n, i δ is he pe o mance o he egene a ion p ocess o pe cen age o he gene a ion o egene a ed oils om was e oils, he supply unc ion o egene a ed base oils is 15 , ()ab au S S P= (2) The e o e, he equilib ium condi ion in he ma ke o egene a ed base oils, i Dab (P) is he demand unc ion o egene a ed base oils is, ( ) ( )au ab S P D P= (3) F om equa ion (3), he a io o he elas ici ies o he supply unc ion o egene a ed base oils, Es, and he demand unc ion o egene a ed base oils, Ed, is ob ained (4) s s d dE dP E dP= Whe e Ps is he supply p ice and Pd he demand p ice. 15 In he IMS, he pe o mance o he egene a ion p ocess is 65%. - Base oil (BO) % addi i es: ɣ (20%) •Lub ica ing oils (LO) % WOP: α (41,4 % - 49,5%) •Was e oil p oduced (WOP) % WOR: µ (≥ 65% in IMS) •Was e oil o egene a ion (WOR) Regene a ion yield: δ (65%) •Regene a ed base oils (RBO) % RBO/LO (≥ 20% in IMS) B azilian Jou nals o Business ISSN: 2596-1934 928 B az. J. o Bus., Cu i iba, . 3, n. 1, p. 921-937 jan. /ma . 2021 Equa ion (4) allows analyzing he e iciency o he economic incen i e policies p oposed o managing was e oils -a subsidy s and an RMS based on an NPS- o p omo e he collec ion and egene a ion o was e oils, by calcula ing he ma ginal incidence and MPC o hese policies. I s is a subsidy pe uni o egene a ed base oil, Ps and Pd di e by he equa ion, (1 )dsP P s=− (5) The e o e, he a io o supply and demand elas ici ies in equa ion (5) is, ()s s d d sE dP E dP d−= (6) Consequen ly, he ma ginal incidence o a subsidy, s, on Ps is, sd s d s dP E d E E =− (7) Finally, being he ma ginal incidence o a subsidy, s, on Pd, ds s d s dP E d E E =− (8) The MPC o his policy, de ined as ma ke p ice educ ion, Pd, because o a subsidy, is ob ained by eplacing he le el o in e en ion co esponding o dPs in equa ion (8), s ss d E CPM dP E = (9) The e o e, i supply elas ici y, Es, is posi i e and demand elas ici y, Ed, nega i e, he subsidy implies he supply p ice, Ps, inc easing, and he educ ion o he demand p ice, Pd. The RMS in he manu ac u e o lub ica ing oils (LO) is he obliga ion o he p oduce s o lub ica ing oils o inco po a e a ce ain pe cen age o egene a ed base oils * (RMS = * LO). I se o he indus y, RMS is based on an NPS. In he applica ion o EPR, he manu ac u e o lub ica ing oils inances he managemen o was e oils gene a ed by lub ican s placed on he ma ke , e ined, and egene a ed oils. Consequen ly, he lub ican p oduce eplaces e ined base oils wi h egene a ed ones. The e o e, each uni o egene a ed base oil esul s in 1/ * nego iable pe mi s. I he pe mi p ice is  , he egene a o ob ains a subsidy equal o *  . Subsequen ly, he ma ginal incidence o he pe mi p ice,  , on Ps is, 1*d s ds E dP d E E  =− (10) In u n, equilib ium equi es a second condi ion ega ding he ma ke o nego iable pe mi s (NPS). In ha ma ke , he supply unc ion SNP(  ) is gi en by he a io be ween he quan i y o egene a ed oils p oduced, i he egene a o ecei es a subsidy, *  , and *. The demand unc ion, B azilian Jou nals o Business ISSN: 2596-1934 929 B az. J. o Bus., Cu i iba, . 3, n. 1, p. 921-937 jan. /ma . 2021 DNP(  ), is de e mined by he amoun o lub ica ing oils pu on he ma ke (LO). The e o e, he equilib ium condi ion in he ma ke is, 1[ (1 )] * * * au s RMS SP   += (11) I =()au S P is a linea unc ion o he p ice, om equa ion (11) i can be ob ained ha *d d  = . Equa ion (11) inde e minacy esol es i he egula o se s *. The ma ginal incidence o * on Ps and Pd is p esen ed, espec i ely, in equa ions (12) and (13). 1d si ds E dP d E E =− (12) 1s di ds E dP d E E =− (13) Whe e i cons i u es he ini ial sha e o egene a ed oils in he consump ion o i s e ining lub ican s. Finally, he MPC o his policy is ha o a subsidy, *  , * is RMS s d E CPM dP E = (14) The e o e, he compa ison be ween he MPC o a subsidy and an RMS, applied h ough an NPS, is equi alen o compa ing a subsidy equal o he pe mi p ice,  , and a subsidy equal o *  . Being *i less han 1, he MPC o an RMS, applied using an SPN, is lowe han ha o a subsidy. As a esul , EPR is a mo e e icien policy han a subsidy o p omo e he collec ion and egene a ion o was e oils. 4 ESTIMATING A SUPPLY AND DEMAND FUNCTION FOR WASTE OILS INTENDED FOR REGENERATION An empi ical analysis o he egene a ed oil ma ke has p e iously been ca ied ou (A ne e al., 2003) by es ima ing a supply and demand unc ion, using O dina y Leas Squa es (OLS). Tha wo k go he supply elas ici y o egene a ed oils o 1.33 and he demand elas ici y o egene a ed oils o 0.39. In u n, he ma ke o was e oils has been cha ac e ized (A ne e al., 2006a) h ough a supply unc ion o was e oils, de ined as collec ed was e oils, and a demand unc ion ega ding he main alo iza ion ope a ions o was e oils ( egene a ion and combus ion). Un il 2000, was e oils we e mainly in ended o uel, wi h a di ec ela ionship be ween he p ice o uel and he p ice o was e oils. Consequen ly, he ma ke es ima e o was e oils was made using h ee-s age OLS B azilian Jou nals o Business ISSN: 2596-1934 936 B az. 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